-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Ac/8pZMnD7Sj8jN9MOLsGqA9M/wpFiiF2sDsUrFEzlyK/MhVLGixLUWoO5kDmQhF g1S/fU8B8ufimUkYYP8cEg== 0000356226-94-000018.txt : 19941125 0000356226-94-000018.hdr.sgml : 19941125 ACCESSION NUMBER: 0000356226-94-000018 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19920630 FILED AS OF DATE: 19941122 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: POLICY MANAGEMENT SYSTEMS CORP CENTRAL INDEX KEY: 0000356226 STANDARD INDUSTRIAL CLASSIFICATION: 6411 IRS NUMBER: 570723125 STATE OF INCORPORATION: SC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-10557 FILM NUMBER: 94561377 BUSINESS ADDRESS: STREET 1: ONE PMS CTR STREET 2: PO BOX TEN CITY: COLUMBIA STATE: SC ZIP: 29202 BUSINESS PHONE: 8037354000 10-Q/A 1 PAGE <1> SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended June 30, 1992 Commission file number 0-10175 POLICY MANAGEMENT SYSTEMS CORPORATION (Exact name of registrant as specified in its charter) South Carolina 57-0723125 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One PMS Center (P.O. Box Ten) Blythewood, S.C. (Columbia, S.C.) 29016 (29202) (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (803) 735-4000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No_____ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 23,177,122 Common shares, $.01 par value, as of July 31, 1992 The information furnished herein reflects all adjustments which are, in the opinion of management, necessary for the fair presentation of the results for the periods reported. Such information should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 1991. PAGE <2> POLICY MANAGEMENT SYSTEMS CORPORATION INDEX PART I. FINANCIAL INFORMATION PAGE Item 1. Financial Statements Consolidated Balance Sheets as of June 30, 1992 and December 31, 1991................. 3 Consolidated Statements of Income for the six and three months ended June 30, 1992 and 1991........... 4 Consolidated Statements of Cash Flows for the six months ended June 30, 1992 and 1991............. 5 Notes to Consolidated Financial Statements............ 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 10 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K.................. 13 Signatures................................................... 14 INTRODUCTORY NOTE THE INFORMATION CONTAINED HEREIN HAS BEEN RESTATED IN NOVEMBER 1994 TO REFLECT ADJUSTMENTS RESULTING FROM SPECIAL AUDITS OF THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS (SEE NOTE 2 OF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS). UNLESS OTHERWISE STATED, HOWEVER, INFORMATION CONTAINED HEREIN IS AS OF JUNE 30, 1992. 3 PART I FINANCIAL INFORMATION POLICY MANAGEMENT SYSTEMS CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited)
June 30, December 31, 1992 1991 (As Restated) (As Restated) (In Thousands, Except Share Data) ASSETS Current assets: Cash and equivalents........................................$ 23,656 $ 39,609 Marketable securities....................................... 185,138 157,805 Receivables, net of provisions for uncollectible amounts of $1,283 ($1,198 at 1991)................................ 91,934 87,398 Income tax receivable....................................... 3,584 1,117 Deferred income taxes....................................... 6,149 6,981 Other....................................................... 7,705 6,840 Total current assets..................................... 318,166 299,750 Property and equipment, at cost less accumulated depreciation and amortization of $77,678 ($76,352 at 1991)............... 125,718 117,908 Receivables................................................... 8,020 11,568 Note receivable............................................... 9,500 9,500 Intangibles, less accumulated amortization of $25,187 ($20,979 at 1991)................................... 103,945 105,874 Capitalized software costs, less accumulated amortization of $80,170 ($69,866 at 1991)................... 82,056 77,669 Deferred income taxes......................................... 1,013 - Other......................................................... 11,241 10,423 Total assets..........................................$659,659 $632,692 LIABILITIES Current liabilities: Accounts payable and accrued expenses.......................$ 39,222 $ 51,523 Accrued contract termination costs.......................... 2,498 1,095 Current portion of capital lease obligations................ 99 - Current portion of long-term debt........................... 5,675 3,689 Unearned revenues........................................... 10,815 9,204 Other....................................................... 1,216 1,994 Total current liabilities................................ 59,525 67,505 Capital lease obligations..................................... 34 - Long-term debt................................................ 6,157 5,976 Deferred income taxes......................................... 52,174 50,897 Other......................................................... 8,340 8,435 Total liabilities..................................... 126,230 132,813 STOCKHOLDERS' EQUITY Special stock, $.01 par value, 5,000,000 shares authorized.... - - Common stock, $.01 par value, 75,000,000 shares authorized, 23,166,045 shares issued and outstanding (23,054,713 at 1991). 232 231 Additional paid-in capital.................................... 293,488 289,314 Retained earnings............................................. 240,569 211,244 Unrealized loss on marketable equity securities............... (860) (910) Total stockholders' equity............................... 533,429 499,879 Total liabilities and stockholders' equity............$659,659 $632,692 See accompanying notes.
PAGE <4> POLICY MANAGEMENT SYSTEMS CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Six Months Three Months Ended June 30, Ended June 30, 1992 1991 1992 1991 (Restated) (Restated) (Restated) (Restated) (In Thousands, Except Per Share Data) REVENUES Licensing............................. $ 35,692 $ 35,450 $ 17,899 $ 14,241 Services.............................. 202,995 160,812 103,340 83,455 238,687 196,262 121,239 97,696 COSTS AND EXPENSES Employee compensation and benefits.... 83,603 78,144 41,911 39,634 Computer and communications expenses.. 19,745 14,924 9,450 7,180 Information services and data acquisition costs................... 45,458 38,166 23,487 20,120 Other operating costs and expenses.... 51,946 35,419 26,169 17,436 200,752 166,653 101,017 84,370 OPERATING INCOME........................ 37,935 29,609 20,222 13,326 INVESTMENT INCOME, NET OF INTEREST EXPENSE...................... 5,633 3,203 2,840 1,971 INCOME BEFORE INCOME TAXES.............. 43,568 32,812 23,062 15,297 INCOME TAXES............................ 14,243 11,281 7,577 5,214 NET INCOME.............................. $ 29,325 $ 21,531 $ 15,485 $ 10,083 NET INCOME PER SHARE.................... $ 1.27 $ 1.06 $ .67 $ .48 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING........................... 23,138 20,252 23,162 20,981 FULLY DILUTED NET INCOME PER SHARE...... - $ 1.00 - $ .46 See accompanying notes. PAGE <5> POLICY MANAGEMENT SYSTEMS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, 1992 1991 (Restated) (Restated) (In Thousands) Operating Activities Net income.......................................$ 29,325 $ 21,531 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization................. 26,624 20,851 Deferred income taxes......................... 1,096 5,388 Changes in assets and liabilities: Receivables................................... (642) (6,270) Income tax receivable......................... (2,467) (2,593) Accounts payable and accrued expenses......... 3,207 (1,927) Income taxes payable.......................... 814 - Other, net....................................... 169 (9,530) Cash provided by operations................. 58,126 27,450 Investing Activities Increase in marketable securities................ (27,333) (24,822) Acquisition of property and equipment ........... (34,183) (5,789) Capitalized internal software development costs.. (12,221) (14,932) Purchased software............................... (1,211) (368) Proceeds from disposal of property and equipment. 164 1,623 Business acquisitions............................ (2,194) (3,960) Cash used for investing activities.......... (76,978) (48,248) Financing Activities Payments on capital lease obligations............ (398) (1,027) Payments on long-term debt....................... (64) (3,073) Issuance of common stock under stock option plans................................... 3,361 11,603 Cash provided by financing activities....... 2,899 7,503 Net decrease in cash and equivalents............... (15,953) (13,295) Cash and equivalents at beginning of period........ 39,609 27,911 Cash and equivalents at end of period..............$ 23,656 $ 14,616 Noncash Activities Long-term debt arising from and assumed in connection with business acquisitions..........$ 2,187 $ 3,186 Supplemental Information Interest paid.................................... 326 4,900 Income taxes paid................................ 14,869 8,787 See accompanying notes. PAGE <6> POLICY MANAGEMENT SYSTEMS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1992 (Unaudited) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The consolidated financial statements are prepared on the basis of generally accepted accounting principles and include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All material intercompany balances and transactions have been eliminated. Certain amounts previously presented in the consolidated financial statements for prior periods have been reclassified to conform to current classifications. The consolidated balance sheet as of December 31, 1991, and the consolidated statements of operations and cash flows for the three and six months ended June 30, 1992 and 1991 have been restated by the Company, without audit, to conform to the adjustments to the Company's retained earnings as of December 31, 1992 and 1991, as discussed in Note 2. These adjustments include all adjustments which are, in the opinion of management, necessary to state fairly the results for the periods presented. NOTE 2. RESTATEMENT OF RESULTS OF OPERATIONS In August 1993, the Company engaged independent accountants to conduct a special audit of the Company's balance sheet as of December 31, 1992 and its consolidated financial statements as of and for the six months ended June 30, 1993. As a result of this audit, the Company determined that retained earnings previously reported as of December 31, 1992 required adjustment. These adjustments were due to errors in the application of accounting principles and subsequent discovery of facts existing at February 26, 1993, the date of the predecessor auditor's report (see Note 2 of Notes to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 1992). In February 1994, the Company engaged independent accountants to audit the Company's consolidated financial statements as of and for the twelve months ended December 31, 1993 and 1992. As a result of the audit of the Company's consolidated financial statements as of and for the twelve months ended December 31, 1992, the Company determined the specific prior period or periods affected by the above adjustments. The components (net of related tax effects) of the adjustment to previously reported net income for the three and six months ended June 30, 1992, are as follows: PAGE <7> Increase (Decrease) to Net Income Three Months Six Months Ended June 30, Ended June 30, 1992 1992 (In Thousands) Deferral of revenues due to changes in timing of revenue recognition................. $(1,018) $ (785) Reduction of expenses due to capitalization of certain software costs..................... 74 545 Recognition of expenses due to changes in timing of expense accrual..................... 1,698 831 Reserve for losses on certain services contracts..................................... (180) (390) Reduction of current income tax liability due to previously unrecorded tax credits.......... 516 1,014 Net income adjustment........................... $ 1,090 $ 1,215 After giving effect to these adjustments, the principle elements of the Company's consolidated statement of income for the three and six months ended June 30, 1992 were restated as follows: Three Months Ended Six Months Ended June 30, 1992 June 30, 1992 (As Previously (As Previously Reported) (Restated) Reported) (Restated) (In Thousands) Revenues.....................$123,119 $121,239 $239,197 $238,687 Operating income............. 19,326 20,222 37,650 37,935 Other income and expenses, net.............. 2,809 2,840 5,593 5,633 Income before income taxes... 22,135 23,062 43,243 43,568 Net income................... 14,395 15,485 28,110 29,325 Net income per share......... .62 .67 1.21 1.27 The components (net of related tax effects) of the adjustment to previously reported net income for the three and six months ended June 30, 1991, are as follows: Increase (Decrease) to Net Income Three Months Six Months Ended June 30, Ended June 30, 1991 1991 (In Thousands) Deferral of revenues due to changes in timing of revenue recognition.................... $(2,172) $(1,058) Reduction of expenses due to capitalization of certain software costs........................ 1,278 3,005 Recognition of expenses due to changes in timing of expense accrual........................ (168) (833) Reserve for losses on certain services contracts... (289) (1,477) Net income adjustment.............................. $(1,351) $ (363) PAGE <8> After giving effect to these adjustments, the principle elements of the Company's consolidated financial statement of income for the three and six months ended June 30, 1991 were restated as follows: Three Months Ended Six Months Ended June 30, 1991 June 30, 1991 (As Previously (As Previously Reported) (Restated) Reported) (Restated) (In Thousands) Revenues.....................$101,619 $ 97,696 $197,994 $196,262 Operating income............. 15,588 13,326 30,271 29,609 Other income and expenses, net.............. 1,891 1,971 3,126 3,203 Income before income taxes... 17,479 15,297 33,397 32,812 Net income................... 11,434 10,083 21,894 21,531 Net income per share......... .54 .48 1.08 1.06 Fully diluted net income per share.................. .52 .46 1.01 1.00 Deferral of revenues due to changes in timing of revenue recognition includes situations where (i) there were errors in accounting for contracts under the percentage of completion method; (ii) there were delays in receiving signed contracts; (iii) customers prepaid or were billed for services performed in subsequent periods or where refunds or provisions for credit were contractually required and (iv) the Company had future delivery obligations under certain contracts. NOTE 3. NET INCOME PER SHARE Net income per share is based upon the weighted average number of common shares outstanding. Outstanding stock options are common stock equivalents, but are excluded from the computation of net income per share since their dilutive effect is not material. The computation of fully diluted net income per share, which is based upon the weighted average number of common shares plus common stock equivalents outstanding and the assumed conversion of all outstanding convertible debt until actually converted in May 1991, is as follows: PAGE <9> (Restated) (Restated) Six Months Three Months Ended June 30, Ended June 30, 1991 1991 (In Thousands, Except Net Income: Per Share Data) Net income as reported.......... $21,531 $10,083 Interest and amortization on convertible debt (net of income taxes)................ 1,334 473 Adjusted net income......... $22,865 $10,556 Shares: Weighted average number of common shares outstanding..... 20,252 20,981 Common stock equivalents (stock options)............... 485 370 Convertible debt................ 2,169 1,580 Fully diluted shares.......... 22,906 22,931 Fully diluted net income per share....................... $ 1.00 $ .46 Had conversion of the convertible debt occurred on January 1, 1991, net income per share would have approximated fully diluted net income per share for the six and three months ended June 30, 1991. NOTE 4. MARKETABLE SECURITIES Marketable equity securities held for long-term investment are included in other noncurrent assets at market value of $1,150,000 at June 30, 1992 ($1,100,000 at December 31, 1991). A valuation reserve has been established for the amount by which the cost of these securities, $2,010,000 at both June 30, 1992 and December 31, 1991, exceeds market value and is included in stockholders' equity. NOTE 5. OTHER MATTERS The Internal Revenue Service recently completed its normal examination of the Company's consolidated federal income tax returns for the years 1985 through 1988 and has proposed certain adjustments for those years. The Company believes that its judgment in the areas for which adjustments have been proposed has been appropriate and is contesting the proposed adjustments. Additionally, the Company believes that adequate amounts of federal income tax have been provided in its consolidated financial statements for these years. PAGE <10> POLICY MANAGEMENT SYSTEMS CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The consolidated balance sheet as of December 31, 1991, and the consolidated statements of operations and cash flows for the three and six months ended June 30, 1992 and 1991 have been restated by the Company, without audit, to conform to the adjustments to the Company's retained earnings as of December 31, 1992 and 1991, as discussed in Note 2 of Notes to Consolidated Financial Statements. These adjustments include all adjustments which are, in the opinion of management, necessary to state fairly the results for the periods presented. Financial Condition Cash and equivalents and current marketable securities increased $11.4 million between December 31, 1991 and June 30, 1992. Significant nonrecurring expenditures during the six months ended June 30, 1992 include the following: business acquisitions, including debt and contingent payments relating to business acquisitions, ($2.3 million); acquisition of data processing and communications equipment, computer software and office furniture, fixtures and equipment used in the Company's operations ($24.5 million); and payments for construction of additional office facilities at the Company's corporate headquarters in Columbia, South Carolina, ($5.6 million). Significant nonrecurring expenditures anticipated for the remainder of 1992 are as follows: debt payments relating to past business acquisitions ($3.6 million); acquisition of data processing and communications equipment, computer software and office furniture, fixtures and equipment ($5.0 million); and completion of construction of additional office facilities at the Company's corporate headquarters ($3.1 million). The Company believes that current cash and investment reserves and cash to be provided by operations will be sufficient to satisfy its existing and presently anticipated operating and capital resource needs. Other noncurrent assets increased primarily as a result of the acquisition of computer software for internal use. Results of Operations Set forth below are certain operating items expressed as a percentage of revenues and the percent increase for those items between the periods presented: PAGE <11> Percentage of Revenues Six Months Three Months Ended June 30, Ended June 30, 1992 1991 1992 1991 Operating income....... 15.9 15.1 16.7 13.6 Income before income taxes................ 18.3 16.7 19.0 15.7 Income taxes........... 6.0 5.7 6.2 5.3 Net income............. 12.3 11.0 12.8 10.3 Percent Increase Six Months Three Months Ended June 30, Ended June 30, 1992 vs. 1991 1992 vs. 1991 Revenues................ 22.0 24.1 Operating income........ 28.1 52.0 Income before income taxes................. 33.0 51.0 Income taxes............ 26.3 45.3 Net income.............. 36.2 54.0 Revenues Total licensing revenues were $17.9 and $35.7 million for the three and six months ended June 30, 1992, respectively, representing 14.8% and 15.0% of total revenues. Total licensing revenues for the three months ended June 30, 1992 increased $3.7 million (25.7%) compared to the corresponding period in 1991, due primarily to an increase in initial license revenues of $2.9 million. Revenues from continuing monthly license charges for maintenance, system enhancements and services availability ("MESA") and for continuing right-to-use licenses increased $.8 million for the three months comparison. Total services revenues were $103.3 and $203.0 million for the three and six months ended June 30, 1992, respectively, representing 85.2% and 85.0% of total revenues. Compared to $83.5 and $160.8 million for the three and six months ended June 30, 1991, respectively, representing 85.4% and 81.9% of total revenues. Changes in the total services revenue were affected by activities in professional outsourcing and information services, as described below. Total revenues from professional and outsourcing services were $63.2 and $125.3 million for the three and six months ended June 30, 1992 as compared with $53.2 and $101.7 million, respectively, for the corresponding periods in 1991. These increases are primarily attributable to policy management and processing services to the New Jersey Market Transition Facility (MTF) project, facilities management and outsourcing contracts in Europe and Australia and several new outsourcing contracts in the United States. PAGE <12> Revenues from information services were $40.1 and $77.4 million for the three and six months ended June 30, 1992 as compared with $27.8 and $54.7 million for the corresponding periods in 1991. These increases are primarily attributable to an increase in new business associated with automobile property and casualty information services and life information services. Costs and Expenses Employee compensation and benefits expense increased $2.3 million and $5.5 million for the three and six months ended June 30, 1992 compared to the corresponding periods in 1991, primarily as a result of increased costs associated with European and Australian facilities management and outsourcing contracts. Computer and communications expenses increased $2.3 million and $4.8 million for the three and six months ended June 30, 1992 compared to the corresponding periods in 1991. These increases were primarily related to increased costs associated with policy management and processing services, principally the MTF project and to European and Australian facilities management and outsourcing contracts. Information services and data acquisition costs increased $3.4 and $7.3 million for the three and six months ended June 30, 1992 compared to the corresponding periods in 1991. These increases are due primarily to an increase in the volume of state fees for motor vehicle reports, related to new business, which is part of the Company's property and casualty information services business. Other operating costs and expenses for the three and six months ended June 30, 1992 increased $8.7 and $16.5 million compared to the corresponding periods in 1991. These increases result primarily from increased costs associated with providing total policy management outsourcing services, principally the New Jersey MTF, and costs associated with European and Australian facilities management and outsourcing contracts. The increase in investment income, net of interest expense, for the six and three months ended June 30, 1992 over the corresponding periods in 1991 was primarily attributable to interest expense of $2.1 million and $ .7 million for the six and three months ended June 30, 1991, repectively, relating to $100 million of convertible debt of the Company which was converted in May 1991. The effective income tax rate (income taxes expressed as a percentage of pre-tax income) was 32.7% and 34.4% for the six months ended June 30, 1992 and 1991, respectively. The decrease in the effective rate between the periods was due primarily to an increase in nontaxable investment income. PAGE <13> PART II OTHER INFORMATION POLICY MANAGEMENT SYSTEMS CORPORATION Items 1, 2, 3, 4 and 5 are not applicable. Item 6. Exhibits and Reports on Form 8-K. Exhibits There are no exhibits required to be filed with this Quarterly Report on Form 10-Q. Reports on Form 8-K The Company did not file any reports on Form 8-K during the quarter ended June 30, 1992. PAGE <14> POLICY MANAGEMENT SYSTEMS CORPORATION SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. POLICY MANAGEMENT SYSTEMS CORPORATION (Registrant) Date: November 17, 1994 By: Timothy V. Williams Executive Vice President (Chief Financial Officer)
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